MKS Instruments to Buy Carlyle’s Atotech for $5.1 Billion

(Bloomberg) -- MKS Instruments Inc., a maker of equipment for the chip industry, agreed to acquire specialty chemicals group Atotech Ltd. for about $5.1 billion in cash and stock.

The Andover, Massachusetts-based company will offer $16.20 in cash and 0.0552 MKS shares for each Atotech share, according to a statement Thursday, which confirmed an earlier Bloomberg News report. Carlyle Group Inc., the buyout firm that owns 79% of Atotech, has agreed to vote in favor of the transaction.

Shares of MKS, which fell as much as 6.1% in U.S. trading Thursday, closed down 4% to $170.77, giving the company a market value of $9.45 billion. Atotech shares fell 1.7% to $25.09, giving it a market value of almost $5 billion.

Carlyle bought Atotech in 2017 from Total SA and took the company public in February. Atotech specializes in metal and surface-finishing solutions used for applications in electronics, including semiconductors and general metal finishing for automotive construction clients, according to its website.

Complex, Smaller

MKS said the deal will help it gain technology as printed circuit boards for electronics become increasingly complex and physically smaller. The company expects $50 million in annual cost synergies within 18 to 36 months from the transaction, which will be accretive to earnings within the first year and add to MKS's free cash flow.

“When we think about our M&A pipeline we come back to strategy and that's leveraging trends in advanced electronics,” MKS President and Chief Executive Officer John Lee, said in an interview. “No other company has our combined skillset across semiconductors, lasers and packaging.”

It plans to fund the acquisition with a mix of cash on hand and committed debt financing, according to the statement. The purchase, which has been unanimously approved by the boards of both companies, is slated to close by the fourth quarter.

MKS, founded in 1961, has been an active buyer in recent years. Deals have included buying laser manufacturer Newport Corp. in 2016 and a deal for Electro Scientific Industries Inc. in 2018 that valued the company at about $1 billion. It was participated in the bidding war for laser maker Coherent Inc. earlier this year but lost out to II-VI Inc.

Deleveraging Focused

“Once it was in the press that we'd looked at Coherent, every banker in the world seemed to know who we were and pitched us deals,” Lee said. “If a small opportunity comes up in the six- to nine-month period post closing, we may look but we're going to be focused on deleveraging once we complete the Atotech deal.”

Perella Weinberg Partners advised MKS on the deal, while JPMorgan Chase & Co. and Barclays Plc provided financing. Credit Suisse Group AG advised Atotech.